BEIRUT/ANKARA, July 18 (Reuters) - Kurdish fighters haveseized control of a Syrian town on the border with Turkey andare battling Islamist rebel groups linked to al Qaeda forcontrol of oilfields in the northeast of the country.

The fighting is further evidence that the conflict betweenrebels and President Bashar al-Assad's forces that has engulfedSyria since early 2011 has splintered into turf wars that havelittle to do with ousting him.

The capture of Ras al-Ain by the Democratic Union Party(PYD), a Syrian Kurdish party with links to Kurdish militants inTurkey, rang alarm bells in Ankara.

The Turkish government fears the emergence of an autonomousKurdish region in Syria could embolden homegrown militants ofthe Kurdistan Workers' Party (PKK), which is fighting forautonomy in Turkey.

In a statement late on Wednesday, the Turkish military saidRas al-Ain had fallen under the control of the PYD, which itdescribed as a "separatist terrorist organisation". Fighting inthe town had now stopped.

Turkish troops had shot at PYD fighters in Syria after tworocket-propelled grenades fired from Syria struck a border poston the Turkish side of the frontier.

It was the second time in as many days the military hasanswered in kind after several stray bullets from Syria struckthe Turkish town of Ceylanpinar on Tuesday. The military has nowstrengthened security along that part of the border.

FIGHTING SPREADS

Clashes in Ras al-Ain between Kurdish militias, who broadlysupport an autonomous Kurdish region, and Islamist fighters ofthe Nusra Front broke out on Tuesday after Nusra fightersattacked a Kurdish patrol and captured a gunman, the SyrianObservatory for Human Rights said.

The Observatory, a pro-opposition monitoring group, saidfighting had now spread deeper into the largely Kurdish provinceof Hassakeh and battles were raging around the Rumeilan oilfield, about 200 km (125 miles) east of Ras al-Ain.

The field had mostly been shut down, opposition activistssaid, but a few of its pipelines may still be supplyingrefineries in the government-held cities of Homs and Baniyas.

Since March 2011, when the uprising against Assad began,Syria's overall oil production has fallen by nearly 60 percentto 153,000 barrels per day last October, the U.S. EnergyInformation Administration estimates.

The Observatory said at least 29 people had been killedsince fighting between Islamists and Kurds erupted on the borderon Tuesday night, but it believed the toll would be much higheronce final counts are sent in.

Kurdish units have seized an oil field area called Suwaidiya20 and there are clashes in Suwaidiya oil region 3, according tothe Observatory.

It said the Nusra Front and others al Qaeda-linked fighterswere shelling Ras al-Ain from nearby positions

"Part of the reason for the spread is just anger at theKurdish consolidation of control in Ras al-Ain, it's likerevenge and punishment," said one activist who works with therebels and who asked not to be named because the subject iscontroversial.

GROWING STRUGGLE

"But I also believe there this is part of a growing strugglefor control of oil and gas in the region and the rebels areusing this as an opportunity."

Nawaf Khalil, a spokesman for the Kurdish PYD, said theKurds would fight back fiercely to maintain the autonomous zonethey had set up in the area.

"We fought hard to drive out the repressive regime and itsarmy and we liberated the area from oppression. We will notallow either regime control or these al Qaeda-linked groups.

"What is pushing them to fight us is their antagonismagainst our autonomous rule in Kurdish areas. I believe theirother goal is Rumeilan because it is an important oil resource."

The fighting indicated the collapse of a deal, negotiated byprominent Syrian opposition leader Michel Kilo, under which bothsides in the area had cooperated peacefully for months.

Further south in Syria, the Observatory reported heavyshelling in the Damascus countryside, where government forcesare confronting rebels.

There was also further shelling of the city of Homs, wherefighting has raged for the past three weeks. Clashes erupted inthe towns of Deraa and Quneitra in southern Syria, theObservatory said.

The Syrian opposition's political leader, Ahmed Jarba, onThursday met Crown Prince Salman of Saudi Arabia, a major backerof the rebels, in Jeddah.

The Crown Prince "stressed the kingdom's fixed position onthe need to put an end to all forms of extermination and hungerthe Syrian people are subject to," the Saudi state news agency,SPA, reported.